Mortgage rates last week benefited from nervous investor sentiments regarding the fate of Greece and Goldman Sachs. A lack of conviction to own risky stocks heading into the weekend led to a flight to safety rally in benchmark Treasuries which helped mortgage-backed securities and allowed lenders to offer slightly lower mortgage rates.

After bouncing back and forth in a tight range for the entire week, mortgage rates went into the weekend close to their best levels of the month (which really wasn't too different from what we have been seeing over the past 10 days.)

Over the weekend, the European Union and Greece announced that an aid package was put together to prevent Greece from defaulting on their national debt. This bailout was expected to “safeguard financial stability in the euro area as a whole”. This news ended up forcing traders to sell a portion of their "flight to safety" positions in Treasuries which pushed MBS prices lower at the open. Almost all of Friday's modest gains have been erased.  For more on this event, read AQ's opening commentary HERE.

We have several economic releases to start the week.  First report to hit the news wires comes from the Department of Commerce with the release of Personal Income and Outlays. A stronger consumer benefits the stock market while a weaker consumer benefits the bond market.  This report gives us three readings on the health of consumers.    The first is personal income which shows the monthly change in income that households receive from all sources.  Next is consumer spending, which shows the monthly change in the amount of money consumers are spending on durable and non-durable goods and services.   The final reading is the Personal Consumption Expenditure, a preferred read on inflation.

The release indicated that all three readings came in close to economist expectations.  Personal income was up +0.3% with the prior months data revised higher from no change to +0.1%.  Year over year, personal income is up 3.0%.  

Consumer spending posted a +0.6% increase for the highest monthly gain in six months.   The prior month’s print was also revised better from the first reported +0.3% to +0.5%.   This marks the sixth consecutive month of increasing consumer spending indicating the economic recovery is taking hold.  Year over year, consumer spending is up 2.9%. Contributing to the increase in spending was a reduction in the personal savings rate to 2.7%... the lowest rate since September 2008 and the third consecutive monthly decline.  

The PCE index continues to show inflation to be of no concern today with both the overall and the core rate posting a modest +0.1% month over month increase.   Year over year, the core rate continues to hold well within the Fed’s comfort zone for acceptable price increases at +1.3%.  

The next report to be released came from the Institute for Supply Management, the ISM Manufacturing Index.  This is a survey of more than 300 manufacturing firms on the strength of business conditions.  Readings above 50 indicate expanding or improving conditions while readings below 50 indicate contraction.   The ISM index has held above 50 for the last eight releases with last month’s report registering the highest print in over 3 years at 59.6.   Today’s report came in slightly lower than expectations at 60.4.

The  final report on the day was Construction Spending.  This data shows the monthly change in the amount of money spent on construction for public and private residential and non residential projects.  Last month, which reported on February data, construction spending declined -0.6%. for the fourth consecutive month over month contraction and the 34th decline in the last 48 months.   With a glut of homes on the market, it isn’t a bad thing in my opinion to see less new construction though.  Today’s release indicated construction spending in March finally broke the streak of contraction with a better than expected +0.2% increase.

Here are the highlights for the rest of the week:


  • Factory Orders(low to medium impact)
  • Pending Home Sales (medium to high impact)  Since many believe that until housing picks up, our economic recovery will be very difficult which makes tracking home sales data of more importance today than in past times.


  • MBA Applications Index(low impact)
  • ADP Employment Report(medium impact)  This data is not as important as the official government report coming Friday, but it is gaining momentum as a good predictor of job growth.
  • ISM Non-Manufacturing Index(low impact)
  • Announcement of the terms of next week’s offering of 3 year notes, 10 year notes and 30 year bonds.(medium impact)


  • Jobless Claims(low to medium impact)
  • Productivity and Costs(medium impact)


  • Employment Situation Report(HIGH IMPACT)  Economists are expecting 200,000 jobs were created last month.


Reports from fellow mortgage professionals indicate lender rate sheets to be similar to Friday’s repriced sheets.  The par 30 year conventional rate mortgage remains in the 4.875% to 5.125% range for well qualified consumers.  We do have a couple lenders offering 4.75%.  To secure a par interest rate on a conventional mortgage you must have a FICO credit score of 740 or higher, a loan to value at 80% or less and pay all closing costs including an estimated one point loan origination/discount/broker fee.

I continue to favor locking.  Lenders and market participants have proven many times this year their reluctance to drive rates lower.   “Lock the price highs, float the price lows” has been very successful over the last few months.  The only loans I would consider floating are ones a day away from a shorter lock term which offers better pricing.